The reason why your Uber and Airbnb might be costing more

People booking accommodation or Uber trips might have noticed an increase in cost this week as the platforms grapple with a new requirement to apply GST.

It’s the result of the so-called “app tax”, which took effect from April 1.

Here’s what’s going on.

What’s this tax, anyway?

The plan for the tax was introduced by the previous Government.

The change requires platforms such as Airbnb and Uber to collect 15% GST, even if the supplier of the transport or accommodation makes less than the $60,000 a year at which GST registration is required.

So even if you rent your house out just a couple of weeks a year, the people paying to stay there now need to be paying GST, and the platform needs to send that GST to Inland Revenue.

The goal of the change was to create a level playing field between “gig economy” services and traditional accommodation and transport providers.

When the idea was first floated, National was relatively scathing about it.

“What became clear through the select committee process is that this tax isn’t going to be paid by multinationals, IRD have been explicit, the full cost will go to the consumers. I don’t think it can be justified,” now-Finance Minister Nicola Willis said in 2023.

But as it worked through its plans to pay for tax cuts, National was forced to u-turn on its plan to axe the tax. It was estimated that not repealing it would give the Government $200 million over four years.

What does it mean for consumers?

It was reported on Monday that most Airbnb hosts had allowed their tax-inclusive prices to rise by 15%, even though those who are not registered for GST will receive a 8.5% credit from Airbnb designed to cover the GST that would have been claimable on the property’s expenses. They are in effect now pocketing more from each booking than pre-GST.

An Uber spokesperson said its fares had a “modest increase” of less than 10% on the average fare.

“In navigating the intricacies of the new law, we’ve been focused on ensuring the earnings experience for Uber drivers is not negatively impacted.

“Decisions to increase rider fares are never taken lightly, but in this instance we’ve had to prioritise the experience of our drivers while ensuring Uber can continue to provide the level of quality and reliability Kiwis have come to expect from us.”

Airbnb said it had previously written to the Government expressing concerns that the changes would make it more expensive to travel.

“This tax will result in increased booking costs and fewer choices in accommodation. It will mean costs rising across the service industry with people being slugged 15% more when they want to use a ride-share, get food delivered or go on a holiday.”

Deloitte partner Allan Bullot said it would not be a big problem for most consumers.

“There will be an increase in cost for certain people - the platforms are all having to do their bit.”

He said the dynamic pricing models of most of the platforms would make it harder to track how prices were affected over time.

Providers more worried

Bullot said Deloitte was experiencing a lot of inquiries from people who let property via Airbnb and worried about how the changes would affect them.

“The volume of the questions we’re getting - there’s still a lot of uncertainty from accommodation owners.”

He said people were also scared they might now be caught with a requirement to pay GST if they sold a property.

“Some people if they are forced to register and are using [a property] predominantly for the purpose of making taxable supplies they could well get caught. If someone is under the threshold they should not have to pay GST when they make that ultimate sale.”

He said because changes were being made to the legislation right up until the end of March, there was still a lot of uncertainty. “I think the real level of confusion is going to come when people do their first GST return that includes the period after April.”